Homebuilder Toll Brothers Improves Earnings, Expects Prices to Continue Rising

New home
New home

Toll Brothers Inc. (NYSE: TOL) reported secondquarter fiscal 2013 results before markets opened this morning. The luxury homebuilder reported quarterly diluted earnings per share (EPS) $0.14 on revenues of $516 million. In the same period a year ago, Toll Brothers reported an EPS loss of $0.10 on revenue of $373.68 million. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.07 and $511.06 million in revenue.

The company has been able to bolster its average price for a delivered home from $569,000 in the first quarter to $577,000 in the second quarter. Thatis up from $557,000 in the second quarter of 2012.

Gross margin improved slightly, from 23.2% in the year-ago quarter to 23.3% in the second quarter of 2013.

Toll Brothers expects to improve operating margin significantly in the second half of the current fiscal year. The company's CFO is projecting a "greater than 50% increase in revenues" in the second half of the year when compared with the first half of the year.

For the first six months of 2013, the company has posted total revenues of $940.6 million. A 50% increase implies a second-half total of $1.41 billion, for an annual total of $2.35 billion. The consensus estimate from analysts calls for revenues of $2.49 billion.

The company's CEO said:

Demand accelerated significantly this quarter. Increased pricing power and stronger sales drove our agreements up 57% in dollars and 36% in units – the highest for any quarter in seven years. … Buyers who have been on the sidelines for six years are jumping in. Low interest rates, improved customer confidence, a strong stock market, rising home prices and a reawakening economy are stoking the demand that is fueling our luxury market. One year ago we were somewhat reluctant to raise home prices for fear of crimping demand. Now we are finding that in many markets as prices increase, a sense of urgency takes hold and demand continues to rise. We have raised prices this quarter approximately $26,000 per home on average.

Toll Brothers expects to deliver between 3,850 and 4,200 new homes during its 2013 fiscal year at an average delivered price between $610,000 and $630,000 each.

Shares are down 0.6% in premarket trading this morning at $35.80, in a 52-week range of $23.78 to $38.36. Thomson Reuters had a consensus analyst price target of around $37.20 before today's results were announced.

Filed under: 24/7 Wall St. Wire, Earnings, Housing Tagged: TOL